Bamboozled: Couple out $100,000, but who’s to blame?

It was a $100,000 error. That’s not in question. The question is: Who owns the mistake?

Michael Besgin of Manchester accumulated a substantial 401(k) and pension — worth $361,100 — during a 29-year career with Nestle Beverage in Freehold.

“When I invested, it was sort of split up, some this way and some that way, and I left it probably 10, 12, 15 years without ever touching it once,” said Besgin, 51. “It had ups and downs and everybody told me, ‘You’re in it for the long haul,’ so I left it alone.”

When he left that job in 2008, his father-in-law, Richard Redmond, recommended Besgin roll the funds into an individual retirement account, and Besgin went with Redmond to the Millburn offices of Fidelity.

They met with a representative and asked for help.

“We advised their representative that Mike was not an investor, but wanted to put his money in a fund that didn’t need his management,” Redmond said.

They said the rep suggested putting all the money in Fidelity Freedom 2020 Fund, a target date fund that would automatically get more conservative over time. Besgin said he wanted his money on autopilot, and he got it.

Or so he thought.

It wasn’t until months later that Besgin realized Fidelity never invested his money in the Freedom 2020 Fund, but instead the money was parked in a cash fund. Had the rollover been invested per Besgin’s application, the account would be worth $100,000 more.

THE APPLICATION

The application provided two investment options: The cash reserves account or a Fidelity Freedom mutual fund. Bamboozled reviewed the application, which clearly had an X next to Fidelity Freedom 2020 Fund.

When Besgin received the checks from his 401(k) and pension, he forwarded them to Fidelity. The receipt of the checks was recorded by Fidelity on Jan. 12, 2009.

Confident the rollover was complete, Besgin went on with his life. He received monthly account statements, but given that he had no plans to move money, he didn’t look at them closely. Account balances showed he hadn’t lost anything, but he hadn’t gained much, either. As a long-term investor, he let the money ride.

Until Oct. 20. Besgin’s father-in-law Redmond was over for a corned beef and cabbage dinner and he asked about the account. Besgin showed him a statement and Redmond knew something was terribly wrong.

The funds had never been invested in Fidelity Freedom 2020. They had been sitting, nearly idle, for months, while the stock market recovered from the devastation of the previous year’s downturn.

“I was shocked,” said Besgin, who admits he should have looked more closely at account statements. “I realized I should learn to do better with this.”

Shocking, indeed. We asked Morningstar.com to run the numbers. Had Besgin’s $361,100 been placed in the correct fund, it would have been worth $458,879 on Oct. 20 — a gain of 27.08 percent. (Though April 15, it would have been worth $496,083, a gain of 37.38 percent.) Instead, the account was worth $362,939 for a gain of only $1,839.

Redmond and Besgin immediately went online and reinvested the account in the correct mutual fund. Then they contacted Fidelity.

They found no relief at the Millburn office or through calls to customer service. Too much time had elapsed, they said they were told. Besgin finally hooked up with an account executive who would work with him.

“She said it was too long since the initial investment to correct the account entirely. She offered $3,000 and I turned that down, then she called again and offered $5,000. I turned that down, too,” he said.

Besgin then wrote a letter to Fidelity chairman Edward C. Johnson and received a response on Dec. 23, 2009, but it was not the one they were hoping for.

With nowhere else to turn, they contacted Bamboozled.

TAKING RESPONSIBILITY

There is no question that investors — experienced or otherwise — have a responsibility to read their account statements. It’s absolutely fair to say Besgin should have paid more attention to his account, and even Besgin agrees.

But now that the damage is done, Bamboozled took a look at who should be held responsible.

The application clearly states that Besgin’s 401(k) and pension should be invested in the Freedom 2020 fund. It’s also pretty clear that Fidelity saw some wrongdoing in its actions, given that Besgin was offered $3,000 and then $5,000.

We asked Fidelity to take another look at Besgin’s case, but because of privacy reasons, it could not discuss the specifics of his experience.

Fidelity spokesman Adam Banker said the company takes customer service and guidance very seriously. The company tries to be helpful, he said, and they request customers with questions or concerns contact them in a timely fashion.

Customers also have responsibilities, he said, including making sure they are receiving transaction confirmations, account statements and other communications, and reviewing them for accuracy.

“Confirmations and statements are presumed to be accurate unless customers specifically tell us otherwise,” Banker said.

Point taken. But still, for whatever reason, Fidelity never followed Besgin’s instructions on the application.

“When a check is received with a new-account application, the investment instructions on the application apply to that check,” Banker said. “If a check is received at a later date and is not accompanied by investment instructions, that check is deposited into the core-account position until we receive up-to-date investment instructions from the customer.”

But nowhere on the application does it state customers who send the application first and their funding checks later need to send specific investment instructions.

Plus, the application itself asks how much money the customer will be using to fund the account, and in two places, it asks where the funds should be invested.

Banker would not comment on the $5,000 offer made to Besgin, or if the company is considering other alternatives to satisfy this customer.

GETTING SATISFACTION

The Financial Industry Regulatory Authority said investors who feel they have been treated unfairly can file a complaint with FINRA at finra.org/Investors/ProtectYourself/p118628. Investors may also consider arbitration, said spokesman George Smaragdis.

Arbitration will be Besgin’s next move. He said he feels he has a strong case given the crystal-clear application and the intent displayed during conversations with Fidelity before his initial investment.

“Fidelity has the slogan, ‘We have the people, guidance and investments to help you find your way. Follow the green arrow.’ ” he said. “They let me down on all three of their principles, and the green arrow left me $100,000 poorer.”